Interim Results
Big Yellow Group PLC
27 November 2007
27 November 2007
Big Yellow Group PLC
("Big Yellow", "the Group" or "the Company")
Results for the Six Months and Second Quarter ended 30 September 2007
Big Yellow Group PLC, the self storage company, is pleased to announce results
for the six months and for the second quarter ended 30 September 2007.
Second First
quarter quarter Six months Six months
ended ended ended ended
30 Sept 30 Jun 30 Sept 30 Sept
2007 2007 2007 2006
Annualised revenue * £57.8m £55.3m +5% £57.8m £50.0m +16%
Revenue £15.1m £13.5m +12% £28.6m £24.4m +17%
Profit before tax £46.3m £58.8m -21%
Adjusted profit before
tax (1) £7.2m £7.0m +3%
Basic earnings per share 40.10p 38.37p +5%
Adjusted earnings per
share (2) 5.89p 4.47p +32%
Adjusted NAV
per share (3) 471.9p 347.3p +36%
Interim dividend 4.0p 3.5p +14%
Occupied space 1,918,000 sq ft 1,931,000 sq ft -1% 1,918,000 sq ft 1,792,000 sq ft +7%
(1) See note 5 (2) See note 7 (3) See note 13
* Based on revenue at the end of the period in respect of storage and other
related income
• Revenue increase of 17% to £28.6 million over same period last year
(2006: £24.4 million)
• Adjusted profit before tax(1) of £7.2 million up 3% (2006: £7.0 million)
• Adjusted net assets per share(3) up 8% to 471.9 pence as at 30 September
2007 from 437.8 pence as at 31 March 2007
• Interim dividend up 14% to 4.0 pence per ordinary share (2006: 3.5 pence)
• 45 stores now open with a further 27 committed, providing 4.5 million sq ft of
self storage space when completed; Sutton opened in the period, Sheen closed for
redevelopment and Ealing and Barking Central stores opened after period end
• Acquired nine freehold sites for redevelopment as self storage centres to
provide 550,000 sq ft of storage space
• Three in London at Enfield, Gypsy Corner and New Cross
• One each in Reading, Birmingham, Camberley, Sheffield, Edinburgh and
Guildford
• Six planning consents granted since April 2007
• Formation of £150 million partnership with Pramerica Real Estate Investors
Limited to develop Big Yellow stores in the Midlands, the North of England
and Scotland
• Banking facility increased by £50 million to £325 million, with Lloyds TSB
joining the syndicate
Commenting on the outlook, Nicholas Vetch, Chairman, said:
"We are currently experiencing more testing trading conditions. That said this
is a seasonally weak trading period, and we hope to see the usual pick up early
in the new year. The group enjoys high operating margins, strong cash flow,
relatively low debt gearing and owns 90% of its property assets freehold. This
we believe will provide resilience to outside influences, although not complete
immunity.
Historically, the lack of available sites has acted as a significant barrier to
the creation of new purpose built storage centres. We believe that more
challenging financial markets will add a further significant barrier except for
the most well capitalised companies with well established track records.
We believe our £287 million, (1.9 million sq ft) development programme, which is
carried at cost, will create significant valuation surpluses over the coming
years, starting with the five London stores opening in the second half of this
year.
The equity and debt available in our newly formed partnership with Pramerica,
together with the undrawn debt in our core facility, results in cash resources
currently available of approximately £200 million. We feel we are ideally
positioned to take advantages of opportunities which may present themselves in
the year ahead."
- Ends -
For further information, please contact:
Big Yellow Group PLC 01276 477811
Nicholas Vetch, Chairman
James Gibson, Chief Executive Officer
Weber Shandwick Financial 020 7067 0700
Louise Robson, John Moriarty or Charlie Hooper
Notes to Editors
Big Yellow Group PLC is one of the leading and most dynamic self-storage groups
in the UK. It was founded in 1998 by Nicholas Vetch, Philip Burks and James
Gibson and listed on AIM in May 2000, moving to the Official List of the London
Stock Exchange in 2002.
Big Yellow has expanded rapidly and now operates from 45 stores, 44 in London
and the South, and one in Leeds, with a further 27 stores in development and of
the 72, 61 are held freehold and three long leasehold (approximately 90%). All
the stores have the distinct yellow branding, in accessible main road locations,
with the majority being within the M25 or in strong urban conurbations. When
fully built out the portfolio will provide approximately 4.5 million sq ft of
flexible storage space.
The Group has pioneered the development of the latest generation of self-storage
facilities, which utilise state of the art technology and are located in high
profile, main road locations. Its focus on the location and visibility of its
buildings, coupled with excellent customer service, has created the most
recognised brand name in the UK self-storage industry.
Big Yellow Group PLC
("Big Yellow", "the Group" or "the Company")
Results for the Six Months and Second Quarter ended 30 September 2007
Chairman's Statement
The Board of Big Yellow Group PLC, the self storage company, is pleased to
announce results for the six months and for the second quarter ended 30
September 2007.
FINANCIAL RESULTS
Revenue for the period was £28.6 million, up 17% from the £24.4 million achieved
in the comparable period last year. Revenue for the second quarter of £15.1
million was 12% up on the £13.5 million reported for the quarter to 30 June.
Profit before tax in the period was £46.3 million, down from £58.8 million,
largely resultant from lower revaluation surpluses following the opening of
fewer stores in the period when compared to the same period last year. After
adjusting for the gain on the revaluation of investment properties and other
matters shown in the table below, the Group made an adjusted profit before tax
in the period of £7.2 million, up 3% from £7.0 million for the same period last
year.
The increase in adjusted profit before tax was held back by rising net interest
costs in the period (£1.9 million higher than in the comparable period last
year), due to a combination of increased debt drawn down to fund the acquisition
and development of new sites, and higher interest rates. We expect the impact of
higher interest rates will be less going forward as we take advantage of lower
medium term rates.
Profit before Tax Analysis Six months Six months to Year ended
to 30 Sept 30 Sept 31 March
2007 2006 2007
£m £m £m
_____________________________________________________________________________
Profit before tax 46.3 58.8 152.8
Gain on revaluation of
investment properties (39.8) (51.5) (138.3)
Change in fair value of
interest rate derivatives 0.3 (0.3) (0.7)
(Gains)/losses on sale of
non-current assets (0.1) - 1.1
REIT conversion costs 0.2 - 0.5
Non-recurring indirect tax costs 0.3 - -
Tenant surrender premium - - (1.2)
_____________________________________________________________________________
Adjusted profit before tax 7.2 7.0 14.2
_____________________________________________________________________________
STORES AND THE MARKET
At the period end occupied space represented 1,918,000 sq ft, up 7% from
1,792,000 sq ft at the same time last year. This represents a 73% occupancy rate
across all 43 stores open at the period end, unchanged from the same period last
year. During the period we opened a store in Sutton, with further centres opened
in Ealing and Barking Central since the period end. We are intending to open a
further three stores in the financial year, in Balham, Merton, and our flagship
139,000 sq ft store in Fulham.
We have included, as usual, a table summarising the trading performance of all
our stores over the year.
The portfolio of 32 stores that were open for more than two years at the
beginning of the period was 83% occupied at the end of the period, with an
average occupancy during the period of 84%. In addition, these 32 stores
achieved EBITDA margins of 63% and after an allocation of central overhead, net
operating income margins of 57%, unchanged from the same period last year.
Same store revenue for these 32 stores increased 7% year-on-year, of which 6% is
a result of yield improvement and the balance is occupancy growth.
Total packing materials, insurance and other sales were £4.2 million (2006: £3.2
million), an increase of 31%.
TAXATION
The Group converted to a Real Estate Investment Trust ("REIT") on 15 January
2007. Since then we have benefited from a zero tax rate on our qualifying self
storage earnings. We only pay tax on the profits attributable to our residual
business, comprising primarily of the sale of packing materials and insurance.
The tax charge for the period ended 30 September 2007 is £327,000. This arises
due to taxation on the residual business on the exercise of share options and a
£90,000 conversion charge payable on the market value of a property acquired
through a corporate structure in the period.
Furthermore, Big Yellow has a significant development pipeline of self storage
assets within the REIT ringfence and any development profits arising on these
assets will generally be tax free.
DIVIDENDS
Interim Interim
Dividend Dividend
2007 2006
p p
_________________________________________________________
Property income dividend - n/a
Ordinary dividend 4.0 3.5
_________________________________________________________
Total 4.0 3.5
_________________________________________________________
Our dividend policy is governed by our REIT regulatory requirements which
determine the level of property income dividend ("PID"), with any ordinary
dividend in excess of this assessed by the Board based on prevailing
circumstances and the outlook for the Group. As announced previously, the
Board's intention in a REIT regime is to pay a total dividend in excess of the
minimum PID required under the regulations. Dividends will be set based on 90%
of qualifying post depreciation earnings. On the basis of the full year
forecasted distributable reserves for PID purposes, no PID will be required.
This position will continue to be monitored.
Accordingly the Board is recommending an interim dividend of 4.0 pence per
share, an increase of 14% from the prior half year dividend of 3.5 pence.
The ex-dividend date will be 5 December 2007 and the record date 7 December 2007
with an intended payment date of 28 December 2007.
VALUATION AND NET ASSET VALUE
The Group's investment properties have been valued by Cushman and Wakefield (C&
W). At 30 September 2007 the total value of the Group's properties was £788.7
million, comprising £649.4 million for the 43 storage centres which were open at
the period end (and one store which has been closed for redevelopment), £131.4
million for sites held for development and £7.9 million of surplus land held for
sale. The properties held for development and sale are held at historical cost
less provision for impairment and have not been externally valued.
The valuation translates into an adjusted net asset value of 471.9 pence per
share (see note 13), up 36% from 347.3 pence per share last year and 8% from
437.8 pence per share at 31 March 2007.
The value of the investment property portfolio at 30 September 2007 was £649.4
million (2006: £489.8 million), up £59.3 million from £590.1 million at 31 March
2007.
The increase in valuation of the same store portfolio is £32.0 million,
representing a 5.5% total uplift, of which we estimate 0.5% is a function of
capital growth and 5.0% operational performance. Capital expenditure on existing
stores was £8.5 million, including the cost of acquiring the freehold of our
Chelmsford store. The balance of £18.8 million is the valuation of the new store
opened in the period, Sutton, which comprised capital expenditure of £10.9
million and a revaluation uplift of £7.9 million.
The net yield on the portfolio based on the net operating income at store level
in the first year after the projected stabilisation of each store is 6.75%
(March 2007: 6.80%; September 2006: 7.34%). These yields are taken as being
after an allocation of overhead. As a comparison with conventional property
yields, the commensurate yield pre overhead allocation is 7.37%.
Valuations on self storage assets have been difficult to establish to date due
to the lack of transactions. Clearer evidence is now emerging as a number of
transactions have been completed recently and importantly in two instances since
the current dislocation in financial markets started. Those stores that were
sold were for the most part not prime freehold purpose built centres but,
notwithstanding that achieved healthy prices.
As at As at As at
30 Sept 30 Sept 31 March
2007 2006 2007
Analysis of Net Asset Value £'000 £'000 £'000
____________________________________________________________________________
Basic net asset value 527.5 319.4 488.0
Exercise of share options 2.9 3.3 3.3
____________________________________________________________________________
Diluted net asset value 530.4 322.7 491.3
Adjustments:
Deferred tax on revaluation surpluses - 87.5 -
Tax on fair value of interest rate swaps - - (0.1)
____________________________________________________________________________
Balance sheet adjusted net asset value 530.4 410.2 491.2
____________________________________________________________________________
Diluted net assets per share (pence) 447.7 273.2 416.0
Balance sheet adjusted net assets per
share (pence) 447.7 347.3 415.8
Diluted shares used for calculation (million) 118.5 118.1 118.1
Balance sheet adjusted net asset value
(as above) (£m) 530.4 410.2 491.2
Valuation methodology assumption
(see note 14) (£m) 28.8 - 25.9
Adjusted net asset value (£m) 559.2 410.2 517.1
Adjusted net assets per share (pence) 471.9 347.3 437.8
____________________________________________________________________________
PROPERTY AND CONSTRUCTION
We have had an active first half of the year with seven sites acquired in the
period and a further two sites since the period end, three in London at
Enfield, Gypsy Corner and New Cross and a further six in Reading, Birmingham,
Camberley, Edinburgh, a second site in Sheffield and Guildford. We have also
acquired the freehold of our store in Chelmsford.
There are now 27 stores in the pipeline which when fully developed will
represent an additional 1.7 million square feet and when open will provide the
Group with a total of 72 stores and 4.5 million square feet. We have planning
permission on ten of the 27 pipeline stores and are in negotiations on the
remaining 17. 57% of our total stores and sites are located within the M25 and
64 (over 90% by value) are freehold or long leasehold. A further three stores,
in Balham, Merton and Fulham, are expected to open in this financial year.
We believe the current correction in the property market will inevitably impact
the market for raw land. We are seeing signs of this and expect there to be more
opportunities to acquire sites for our store development programme.
ESTABLISHMENT OF PARTNERSHIP
Yesterday we announced the establishment of a £150 million partnership, the Big
Yellow Limited Partnership, with Pramerica Real Estate Investors Limited
("Pramerica") to develop up to 25 stores in the Midlands, the North of England
and Scotland.
Big Yellow is committing £25 million to the venture, and Pramerica £50 million,
resulting in a one third, two thirds equity split. Big Yellow is contributing
five of its development sites and its existing store in Leeds to the joint
venture for a cash payment. The initial value of the sites to be transferred
into the venture is £20.3 million. Big Yellow has also entered into conditional
contracts to sell two more of its development properties in Birmingham and
Manchester to the partnership, when they are substantially complete.
A five year term development loan of £75 million has been secured from the Royal
Bank of Scotland plc to further fund the Partnership.
Big Yellow has the option to buy the assets or Pramerica's share of the equity
in the Partnership, exercisable from 31 March 2013.
In addition the Group has a right to a promote at the exit date of the
partnership.
Big Yellow has had an excellent eight year relationship with Pramerica since
their initial investment in Big Yellow in 1999. We are pleased to have
established this investment with such a prestigious institution.
The Partnership will allow us to continue to expand with confidence into the
northern part of the UK, whilst at the same time improving the financial
performance of the group. Further it will release funds for deployment into the
South of England where we expect to see more opportunities in a less competitive
property market.
Lastly, we will earn certain property related and operational fees from the
partnership which should increase the profitability of the group in the short to
medium term.
FINANCING AND TREASURY
The Group is strongly cash generative and draws down from its longer term
committed facilities as required to meet obligations. Adjusted cash generated
from operations (see note 16) increased by 15% to £16.4 million (2006: £14.3
million) for the period.
Net bank debt of £250.1 million at the period end represents 32% of the Group's
investment and development property assets, totalling £780.8 million, and 45% of
adjusted net assets of £559.2 million.
We focus on improving our cash flows and we currently have healthy interest
cover of approximately 2.3 times with a relatively conservative debt structure
secured principally against the freehold estate. The Group was comfortably in
compliance with its bank covenants at 30 September 2007, and we forecast to be
in compliance with our banking covenants in the foreseeable future.
At the period end the Group had a syndicated bank facility with the Royal Bank
of Scotland, Bank of Ireland and Barclays of £275 million, secured on 33
freehold and leasehold assets. Since the period end the Group has increased this
facility by a further £50 million, with the addition of Lloyds TSB Bank plc to
the syndicate.
The net debt at the end of September of £250.1 million gives us £74.9 million,
with the new facility, of available funds to expand the business with
significant balance sheet space given the relatively low level of gearing.
As stated we have incurred higher interest charges in the period but we expect
that to diminish as medium term interest rates fall and we take the opportunity
to lock in at lower levels. We have recently entered into a five year interest
rate swap on £50 million at 6.2% (including margin). This will result in a
significant reduction on the floating rate cost.
Whilst credit markets are difficult we have demonstrated that we are able to
secure debt on sensible terms from high quality lenders. Accordingly, alongside
the downstream partnership funding discussed above, we are reasonably confident
that we can continue to finance our planned expansion.
INTERNATIONAL FRANCHISE
I am pleased to announce that in May we signed our second International
Franchise Agreement in the Kingdom of Bahrain with Big Yellow FZ LLC, a
privately backed business set up to exploit the opportunities for development of
a network of Big Yellow stores in the Gulf Cooperation Council states. Big
Yellow FZ LLC also hold our franchise in Dubai, and the site for their 280,000
sq ft store is under construction and is expected to open in Spring 2008.
As is typical of franchise structures, we are not investing capital in this
business but providing operating know-how and the licensing of the Big Yellow
brand for an upfront fee and a share of future revenues.
RISKS AND UNCERTAINTIES
The operational risks facing the Group for the remaining six months of the
financial year are consistent with those outlined in the Annual Report for the
year ended 31 March 2007. The outlook for the housing market and the economy is
weaker than in March 2007, but the risk mitigating factors listed in the 2007
Annual Report are still appropriate.
OUTLOOK
We are currently experiencing more testing trading conditions. That said this is
a seasonally weak trading period, and we hope to see the usual pick up early in
the new year. The group enjoys high operating margins, strong cash flow,
relatively low debt gearing and owns 90% of its property assets freehold. This
we believe will provide resilience to outside influences, although not complete
immunity.
Historically, the lack of available sites has acted as a significant barrier to
the creation of new purpose built storage centres. We believe that more
challenging financial markets will add a further significant barrier except for
the most well capitalised companies with well established track records.
We believe our £287 million, (1.9 million sq ft) development programme, which is
carried at cost, will create significant valuation surpluses over the coming
years, starting with the five London stores opening in the second half of this
year.
The equity and debt available in our newly formed partnership with Pramerica,
together with the undrawn debt in our core facility, results in cash resources
currently available of approximately £200 million. We feel we are ideally
positioned to take advantages of opportunities which may present themselves in
the year ahead.
Nicholas Vetch
Chairman
26 November 2007
- Ends -
RESPONSIBILITY STATEMENT
We confirm to the best of our knowledge:
(a) the condensed set of financial statements has been prepared in accordance
with IAS 34 "Interim Financial Reporting";
(b) the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first six
months and description of principal risks and uncertainties for the
remaining six months of the year); and
(c) the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related party transactions and
changes therein).
By order of the Board
James Gibson
Chief Executive Officer
26 November 2007
BIG YELLOW GROUP PLC
PORTFOLIO SUMMARY
Years since September September September September September September
opening as at 1 2007 2007 2007 2006 2006 2006
April 2007 > 2 years < 2 years Total > 2 years < 2 years Total
Number of stores* 32 11 43 32 9 41
========= ========= ========= ========= ========= =========
As at 30
September 2007
Total capacity
(sq ft) 1,949,000 684,000 2,633,000 1,949,000 503,000 2,452,000
Occupied space
(sq ft) 1,625,000 293,000 1,918,000 1,625,000 167,000 1,792,000
Percentage occupied 83% 43% 73% 83% 33% 73%
£'000 £'000 £'000 £'000 £'000 £'000
Annualised revenue 48,372 9,416 57,788 45,100 4,923 50,023
For the 6 month
period:
Av. Occupancy 84% 43% 73% 83% 33% 72%
Av. annual rent psf £24.68 £23.10 £24.54 £23.86 £17.74 £23.54
Self storage income 20,203 3,384 23,587 19,298 1,481 20,779
Other storage related
income(1) 3,379 869 4,248 2,845 405 3,250
Ancillary store rental
income 41 7 48 27 20 47
_________ _________ _________ _________ _________ _________
Total revenue 23,623 4,260 27,883 22,170 1,906 24,076
Direct store operating
costs (excluding
depreciation) (7,704) (2,254) (9,958) (7,091) (1,484) (8,575)
Short leasehold
rent(2) (1,134) (21) (1,155) (1,113) - (1,113)
_________ _________ _________ _________ _________ _________
Store EBITDA(3) 14,785 1,985 16,770 13,966 422 14,388
EBITDA Margin(4) 63% 47% 60% 63% 22% 60%
Central overhead(5) (1,418) (248) (1,666) (1,330) (254) (1,584)
_________ _________ _________ _________ _________ _________
Store Net Operating
Income 13,367 1,737 15,104 12,636 168 12,804
NOI margin 57% 41% 54% 57% 9% 53%
_________ _________ _________
Capital
expenditure £m £m £m
To 30 September 2007 158.4 77.1 235.5
Cost to complete - 2.4 2.4
_________ _________ _________
Total projected cost 158.4 79.5 237.9
_________
* - trading results for our Sheen store, which was closed for redevelopment in
June 2007 are shown in stores less than 2 years.
(1) Packing materials, insurance and other storage related fees.
(2) Rent for 8 short leasehold properties accounted for as investment properties
and finance leases under IFRS with total self storage capacity of 482,000 sq
ft, plus rent for the Chelmsford store to 29 August 2007 whose Freehold was
purchased at that date. The EBITDA for Chelmsford is classed within Freehold
stores from 29 August.
(3) Earnings before interest, tax, depreciation and amortisation.
(4) Of stores open more than 2 years, the leaseholds achieved a store EBITDA of
£3.22 million and EBITDA margin of 46%. The freehold stores achieved a store
EBITDA of £11.56 million and EBITDA margin of 69%.
(5) Allocation of overhead based on 6% of estimated stabilised income.
BIG YELLOW GROUP PLC
CONSOLIDATED INCOME STATEMENT
Six months ended 30 September 2007
Year
Six months Six months ended
ended ended 31 March
30 Sept 2007 30 Sept 2006 2007
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Revenue 2 28,635 24,448 51,248
Cost of sales (11,114) (9,008) (18,536)
_________ _________ _________
Gross profit 17,521 15,440 32,712
Administrative expenses (3,024) (2,608) (5,645)
_________ _________ _________
Operating profit before gains
and losses on property assets 14,497 12,832 27,067
Gain on the revaluation of
investment properties 39,826 51,447 138,349
Gains/(losses) on the sale of
non-current assets 60 23 (1,078)
_________ _________ _________
Operating profit 54,383 64,302 164,338
Investment income 218 733 1,250
Finance costs 3 (8,286) (6,229) (12,751)
_________ _________ _________
Profit before taxation 46,315 58,806 152,837
Taxation 4 (327) (17,698) 60,391
_________ _________ _________
Profit for the period
(attributable to equity
shareholders) 45,988 41,108 213,228
========= ========= =========
Basic earnings per share 7 40.10p 38.37p 192.97p
========= ========= =========
Diluted earnings per share 7 39.72p 37.81p 190.31p
========= ========= =========
Adjusted earnings per share are shown in note 7.
All items in the income statement relate to continuing operations.
BIG YELLOW GROUP PLC
CONSOLIDATED BALANCE SHEET
30 September 2007
Note 30 Sept 30 Sept 31 March
2007 2006 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Non-current assets
Investment property 8a 649,420 489,850 590,060
Development property 8a 131,428 72,171 96,393
Interest in leasehold properties 8a 24,027 26,259 27,038
Plant, equipment and
owner-occupied property 8b 3,070 3,136 3,170
Goodwill 8c 1,433 1,433 1,433
_________ _________ _________
809,378 592,849 718,094
_________ _________ _________
Current assets
Inventories 362 363 437
Trade and other receivables 9 7,743 7,638 6,982
Derivative financial instruments 151 178 512
Cash and cash equivalents 919 35,960 2,110
Deferred tax asset 11 530 - 650
Non-current assets classified as
held for sale 8d 7,891 19,000 18,227
_________ _________ _________
17,596 63,139 28,918
_________ _________ _________
Total assets 826,974 655,988 747,012
========= ========= =========
Current liabilities
Trade and other payables 10 (20,138) (21,488) (25,586)
Obligations under finance leases (2,094) (2,219) (2,306)
Current tax liabilities
- REIT conversion charge (90) - (11,997)
- Corporation tax liability (85) - (71)
_________ _________ _________
(22,407) (23,707) (39,960)
_________ _________ _________
Non-current liabilities
Bank borrowings 12 (250,015) (191,429) (189,225)
Deferred tax liabilities 11 - (89,766) -
Obligations under finance leases (21,933) (24,040) (24,732)
Other payables 10 (5,116) (7,674) (5,116)
_________ _________ _________
(277,064) (312,909) (219,073)
_________ _________ _________
Total liabilities (299,471) (336,616) (259,033)
========= ========= =========
Net assets 527,503 319,372 487,979
========= ========= =========
Equity
Called up share capital 15 11,525 11,443 11,456
Share premium account 15 41,393 40,824 40,864
Reserves 15 474,585 267,105 435,659
_________ _________ _________
Equity shareholders' funds 527,503 319,372 487,979
========= ========= =========
BIG YELLOW GROUP PLC
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
Six months ended 30 September 2007
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Current and deferred tax recognised in
equity 103 (1,461) (1,230)
_________ _________ _________
Net income/(expense) recognised
directly in equity for the period 103 (1,461) (1,230)
Profit for the year 45,988 41,108 213,228
_________ _________ _________
Total recognised income and expense for
the period attributable to equity
shareholders 46,091 39,647 211,998
========= ========= =========
BIG YELLOW GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
Six months ended 30 September 2007
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Operating profit 54,383 64,302 164,338
Gain on the revaluation of investment
properties (39,826) (51,447) (138,349)
(Gain)/loss on non-current assets (60) (23) 1,078
Depreciation 702 703 1,349
Employee share options 196 148 336
Decrease/(increase) in inventories 75 (25) (99)
(Increase)/decrease in receivables (647) 685 (978)
Increase in payables 1,137 2,589 2,523
_________ _________ _________
Cash generated from operations 16 15,960 16,932 30,198
Interest paid (8,127) (5,492) (14,073)
Interest received 104 264 601
REIT conversion charge paid (11,997) - -
_________ _________ _________
Cash flows from operating activities (4,060) 11,704 16,726
_________ _________ _________
Investing activities
Sale of non-current assets 10,500 - 2,165
Purchase of non-current assets (61,868) (61,195) (96,006)
_________ _________ _________
Cash flows from investing activities (51,368) (61,195) (93,841)
_________ _________ _________
Financing activities
Issue of share capital 598 38,324 38,376
Purchase of own shares (1,084) - -
Equity dividends paid (6,277) (3,066) (7,051)
Increase in borrowings 61,000 36,000 33,707
_________ _________ _________
Cash flows from financing activities 54,237 71,258 65,032
_________ _________ _________
Net (decrease)/increase in cash and
cash equivalents A (1,191) 21,767 (12,083)
Opening cash and cash equivalents 2,110 14,193 14,193
_________ _________ _________
Closing cash and cash equivalents 919 35,960 2,110
========= ========= =========
BIG YELLOW GROUP PLC
A. Reconciliation of net cash flow to movement in net debt
Six months ended 30 September 2007
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Net (decrease)/increase in cash
and cash equivalents in the period (1,191) 21,767 (12,083)
Cash inflow from increase in debt
financing (61,000) (36,000) (33,707)
_________ _________ _________
Change in net debt resulting
from cash flows (62,191) (14,233) (45,790)
Movement in net debt in the period (62,191) (14,233) (45,790)
Net debt at start of period (187,890) (142,100) (142,100)
_________ _________ _________
Net debt at end of period (250,081) (156,333) (187,890)
========= ========= =========
BIG YELLOW GROUP PLC
Notes to the Interim Review
1. ACCOUNTING POLICIES
Basis of preparation
The results for the half-year ended 30 September 2007 are unaudited and were
approved by the Board on 26 November 2007. The financial information contained
in this report does not constitute statutory accounts within the meaning of the
section 240 of the Companies Act 1985. The full accounts for the year ended 31
March 2007, which received an unqualified report from the auditors, and did not
contain a statement under S.237(2) or (3) of the Companies Act 1985, have been
filed with the Registrar of Companies.
The interim report has been prepared in accordance with IAS 34 "Interim
Financial Reporting".
The unaudited information in the interim financial statements has been prepared
in accordance with International Financial Reporting Standards ("IFRS") and on
the basis of the accounting policies set out in the 2007 Big Yellow Group PLC
Annual Report and Accounts.
2. SEGMENTAL INFORMATION
Revenue represents amounts derived from the provision of self storage
accommodation and related services which fall within the Group's ordinary
activities after deduction of trade discounts and value added tax. The Group's
net assets, revenue and profit before tax are attributable to one activity, the
provision of self storage accommodation and related services. These all arise in
the United Kingdom with the exception of £100,000 of income which arose in
Bahrain.
Six months Six months
ended ended Year ended
30 Sept 30 Sept 31 March
2007 2006 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Open stores
Self storage income 23,587 20,779 42,222
Other storage related income 4,248 3,250 6,741
Ancillary store rental income 48 47 86
_________ _________ _________
27,883 24,076 49,049
Stores under development
Non-storage income 652 372 927
Surrender premiums received - - 1,172
_________ _________ _________
652 372 2,099
Franchise income
Franchise fee received 100 - 100
_________ _________ _________
100 - 100
_________ _________ _________
Total revenue 28,635 24,448 51,248
========= ========= =========
Further analysis of the Group's operating revenue and costs can be found in the
Portfolio Summary.
3. FINANCE COSTS
Six months Six months
ended ended Year ended
30 Sept 30 Sept 31 March
2007 2006 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Interest on bank borrowings 7,133 5,413 11,124
Other interest payable 3 19 20
Interest on finance lease obligations 789 797 1,607
Change in fair value of interest rate swaps 361 - -
_________ _________ _________
Finance Costs 8,286 6,229 12,751
========= ========= =========
4. TAX
Six months Six months
ended ended Year ended
30 Sept 30 Sept 31 March
2007 2006 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Current tax - UK corporation tax at 30% 237 2,605 2,739
Current tax - REIT conversion charge 90 - 11,997
Deferred tax - 15,093 (75,127)
_________ _________ _________
327 17,698 (60,391)
========= ========= =========
In addition to the current period income statement tax charge of £327,000, there
is an overall credit to reserves of £103,000. This consists of a credit for the
current tax deduction of £223,000 and a charge of £120,000 in respect of the
reduction in the deferred tax asset arising on potential future deductions from
the exercise of share options.
5. ADJUSTED PROFIT BEFORE TAX
Six months Six months
ended ended Year ended
30 Sept 30 Sept 31 March
2007 2006 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Profit before tax 46,315 58,806 152,837
_________ _________ _________
Gain on revaluation of investment
properties (39,826) (51,447) (138,349)
Change in fair value of interest rate swaps 361 (320) (654)
(Gains)/losses on sale of non-current assets (60) (23) 1,078
REIT conversion costs 153 - 493
Non-recurring indirect tax cost 304 - -
Tenant surrender premium - - (1,172)
_________ _________ _________
Adjusted profit before tax 7,247 7,016 14,233
========= ========= =========
Adjusted profit before tax, excluding gains on revaluation of investment
properties, changes in fair value of interest rate swaps, non recurring items of
income and expenditure, and gains or losses on the sale of non-current assets,
has been disclosed to give a clearer understanding of the Group's underlying
trading performance.
6. DIVIDENDS
An interim dividend of 4.0 pence per ordinary share has been declared (2006: 3.5
pence). The ex-dividend date will be 5 December 2007 and the record date 7
December 2007 with an intended payment date of 28 December 2007. The interim
dividend has not been included as a liability at 30 September 2007. The 2007
final dividend of £6,277,000 representing 5.5 pence per ordinary share was paid
on 18 July 2007 and is included in Note 15, Movements in Equity.
7. EARNINGS PER ORDINARY SHARE
Six months ended Six months ended Year ended
30 September 2007 30 September 2006 31 March 2007
(unaudited) (unaudited) (audited)
Pence Pence Pence
Earnings Shares per Earnings Shares per Earnings Shares per
£m Million share £m Million share £m million share
Basic 45.99 114.68 40.10 41.11 107.15 38.37 213.23 110.50 192.97
Adjustments:
Dilutive share
options 1.09 (0.38) 1.57 (0.56) 1.54 (2.66)
_______ _______ _______ _______ _______ _______ _______ _______ _______
Diluted 45.99 115.77 39.72 41.11 108.72 37.81 213.23 112.04 190.31
_______ _______ _______ _______ _______ _______ _______ _______ _______
Adjustments:
Gain on
investment
properties (39.83) (34.40) (51.45) (47.32) (138.35) (123.48)
Change in fair
value of interest
rate swaps 0.36 0.31 (0.32) (0.29) (0.65) (0.58)
(Gain)/loss on
sale of
non-current
assets (0.06) (0.05) (0.02) (0.02) 1.08 0.96
Tenant surrender
premium - - - - (1.17) (1.04)
REIT conversion
costs 0.15 0.13 - - 0.49 0.44
Non-recurring
indirect tax cost 0.30 0.26 - - - -
REIT conversion
charge - - - - 12.00 10.71
Deferred tax - - - - (75.13) (67.06)
Tax effect of
non- recurring
items* (0.09) (0.08) 15.54 14.29 (0.28) (0.25)
_______ _______ _______ _______ _______ _______ _______ _______ _______
Adjusted 6.82 115.77 5.89 4.86 108.72 4.47 11.22 112.04 10.01
_______ _______ _______ _______ _______ _______ _______ _______ _______
The adjustment for gains and losses on sale of non-current assets has been
included for consistency with the calculation of adjusted profit before tax (see
note 5).
* - this takes into account the tax effect of the change in fair value of
derivatives, the losses on non-current assets and the non-recurring indirect
tax cost to the extent that they fall outside the exempt business.
8. NON-CURRENT ASSETS
a) Investment property, Development property and Interests in leasehold
properties
Interest in
Investment Development leasehold
property property properties
£'000 £'000 £'000
At 1 April 2007 590,060 96,393 27,038
Additions 3,431 45,974 -
Purchase of freehold 5,164 - (2,459)
Adjustment to present value - - (183)
Reclassifications 10,939 (10,939) -
Revaluation 39,826 - -
Depreciation - - (369)
________ ________ ________
At 30 September 2007 649,420 131,428 24,027
======== ======== ========
b) Plant equipment and owner occupied property
Fixtures,
fittings
Freehold Leasehold Plant and and office
property improvements machinery equipment Total
£'000 £000 £'000 £'000 £'000
Cost
At 1 April 2007 1,796 17 563 4,044 6,420
Additions 5 18 23 187 233
________ ________ ________ _______ _______
At 30 September 2007 1,801 35 586 4,231 6,653
________ ________ ________ _______ _______
Accumulated Depreciation
At 1 April 2007 (50) (17) (215) (2,968) (3,250)
Charge for the period (22) (2) (35) (274) (333)
________ ________ ________ _______ _______
At 30 September 2007 (72) (19) (250) (3,242) (3,583)
________ ________ ________ _______ _______
Net book value
At 30 September 2007 1,729 16 336 989 3,070
======== ======== ======== ======= =======
At 31 March 2007 1,746 - 348 1,076 3,170
======== ======== ======== ======= =======
c) Goodwill
Goodwill relates to the purchase of Big Yellow Self Storage Company Limited in
1999. The asset is tested annually for impairment. The carrying value of £1.4
million remains unchanged from the prior year as there is considered to be no
impairment in the value of the asset.
d) Non-current assets classified as held for sale
The Group has land at one site with a total book value of £7.9 million. Land at
this site is surplus to requirements and the Group intends to sell it within the
next 12 months.
9. TRADE AND OTHER RECEIVABLES
30 Sept 30 Sept 31 March
2007 2006 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Trade receivables 1,839 1,322 1,449
Other receivables 1,456 2,499 267
Prepayments and accrued income 4,448 3,817 5,266
________ ________ ________
7,743 7,638 6,982
======== ======== ========
10. TRADE AND OTHER PAYABLES
30 Sept 30 Sept 31 March
2007 2006 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Current
Trade payables 5,743 2,822 5,283
Other payables 3,966 5,393 2,584
Accruals and deferred income 7,872 11,778 15,162
VAT repayable under Capital
Goods Scheme 2,557 1,495 2,557
________ ________ ________
20,138 21,488 25,586
======== ======== ========
Non-current
VAT repayable under Capital
Goods Scheme 5,116 7,674 5,116
======== ======== ========
11. DEFERRED TAX
30 Sept 30 Sept 31 March
2007 2006 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
The amounts provided in the accounts are:
Revaluation of investment properties - 87,493 -
Capital allowances in advance of depreciation - 3,579 -
Deduction for share options (530) (454) (650)
Other items - (852) -
________ ________ ________
(530) 89,766 (650)
======== ======== ========
12. BANK BORROWINGS
30 Sept 30 Sept 31 March
2007 2006 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Bank borrowings 251,000 192,259 190,000
Unamortised loan arrangement costs (985) (830) (775)
________ ________ ________
250,015 191,429 189,225
======== ======== ========
The bank loans are secured on certain of the Group's properties. The loan is due
to expire on 4 April 2010. Subsequent to the period end, the facility has been
extended from £275 million to £325 million.
13. ADJUSTED NET ASSETS PER SHARE
Analysis of net asset value As at As at As at
30 Sept 2007 30 Sept 2006 31 March 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Basic net asset value 527,503 319,372 487,979
Exercise of share options 2,943 3,346 3,345
_______________________________________
Diluted net asset value 530,446 322,718 491,324
_______________________________________
Adjustments:
Deferred tax on revaluation - 87,493 -
Tax on fair value of interest rate swaps (7) (53) (154)
_______________________________________
Adjusted net asset value 530,439 410,158 491,170
_______________________________________
Basic net assets per share (pence) 461.0 280.6 428.3
Diluted net assets per share (pence) 447.7 273.2 416.0
Balance sheet adjusted net assets per
share (pence) 447.7 347.3 415.8
Balance sheet adjusted net asset value 530,439 491,170
Valuation methodology assumption
(see note 14) 28,750 * 25,890
___________ ___________
Adjusted net asset value (£'000) 559,189 517,060
Adjusted net assets per share (pence) 471.9 437.8
Shares in issue 115,251,181 114,437,110 114,559,534
Own shares held (815,000) (615,000) (615,000)
Basic shares in issue used for
calculation 114,436,181 113,822,110 113,944,534
Exercise of share options 4,053,196 4,282,645 4,167,888
Diluted shares used for calculation 118,489,377 118,104,755 118,112,422
* - there was no valuation carried out on the basis of a sale in a corporate
structure at 30 September 2006.
Net assets per share are shareholders' funds divided by the number of shares at
the period end. The shares currently held in the Group's employee benefits trust
and treasury shares (own shares held) are excluded from both net assets and the
number of shares.
Adjusted net assets per share include:
• the effect of those shares issuable under employee share option schemes;
• deferred tax on the revaluation uplift on freehold and leasehold
properties;
• tax on the fair value adjustment on interest rate swaps; and
• the effect of the revised valuation methodology assumptions (see note 14)
14. VALUATIONS
Revaluation
on deemed
£'000 Deemed Cost Valuation cost
Freehold Stores*
As at 1 April 2007 192,951 521,420 328,469
Movement in period 19,392 57,970 38,578
Transfer on purchase of freehold 1,649 4,050 2,401
________ ________ ________
As at 30 Sept 2007 213,992 583,440 369,448
Leasehold Stores
As at 1 April 2007 18,563 68,640 50,077
Movement in period 142 1,390 1,248
Transfer on purchase of freehold (1,649) (4,050) (2,401)
________ ________ ________
As at 30 Sept 2007 17,056 65,980 48,924
All Stores
As at 1 April 2007 211,514 590,060 378,546
Movement in period 19,534 59,360 39,826
________ ________ ________
As at 30 Sept 2007 231,048 649,420 418,372
======== ======== ========
* Includes one long leasehold property
The freehold and leasehold investment properties have been valued as at 30
September 2007 by external valuers, Cushman & Wakefield ("C&W"). The valuation
has been carried out in accordance with the RICS Appraisal and Valuation
Standards published by The Royal Institution of Chartered Surveyors ("the Red
Book"). The valuation of each of the trading properties has been prepared on the
basis of Market Value as a fully equipped operational entity, having regard to
trading potential. The valuation has been provided for accounts purposes and as
such, is a Regulated Purpose Valuation as defined in the Red Book. In compliance
with the disclosure requirements of the Red Book, C&W have confirmed that:
• The members of the RICS who have been the signatories to the valuations
provided to the Group for the same purposes as this valuation have done so
since September 2004.
• C&W have continuously been carrying out this valuation for the same
purposes as this valuation on behalf of the Group since September 2004.
• C&W do not provide other significant professional or agency services to
the Group.
• In relation to the preceding financial year of C&W, the proportion of
the total fees payable by the Group to the total fee income of the firm is
less than 5%.
Methodology
C&W have adopted different approaches for the valuation of the leasehold and
freehold assets as follows:
Freehold
The valuation is based on a discounted cash flow of the net operating income
over a ten year period and notional sale of the asset at the end of the tenth
year.
Assumptions
A. Net operating income is based on projected revenue received less
projected operating costs together with a central administration charge
representing 6% of the estimated annual revenue. The initial net operating
income is calculated by estimating the net operating income in the first 12
months following the valuation date.
B. The net operating income in future years is calculated assuming
straight-line absorption from day one actual occupancy to an estimated
stabilised/mature occupancy level. In the valuation the assumed stabilised
occupancy level for the 43 trading stores (both freeholds and leaseholds) open
at 30 September 2007 averages 86.07% (March 2007: 86.06%; September 2006:
86.06%). The projected revenues and costs have been adjusted for estimated cost
inflation and revenue growth.
C. The capitalisation rates applied to existing and future net cash flow
have been estimated by reference to underlying yields for industrial and retail
warehouse property, bank base rates, ten year money rates, inflation and the
available evidence of transactions in the sector. On average, for all 43 trading
stores, the yield (net of purchaser's costs) arising from the first year of the
projected cash flow is 5.39% (March 2007: 5.24%; September 2006: 5.77%). This
rises to 6.75% (March 2007: 6.8%; September 2006: 7.34%) based on the projected
cash flow for the first year following estimated stabilisation in respect of
each property.
D. The future net cash flow projections (including revenue growth and cost
inflation) have been discounted at a rate that reflects the risk associated with
each asset. The weighted average annual discount rate adopted (for both
freeholds and leaseholds) is 10.22% (March 2007: 10.19%; September 2006:
10.39%).
E. Purchaser's costs of 5.75% have been assumed initially and sale plus
purchaser's costs totalling 6.75% are assumed on the notional sales in the tenth
year in relation to the freehold stores.
Leasehold
The same methodology has been used as for freeholds, except that no sale of the
assets in the tenth year is assumed but the discounted cash flow is extended to
the expiry of the lease. The average unexpired term of the Group's leaseholds is
18.0 years (March 2007: 18.8 years; September 2006: 19.3 years).
Valuation assumption for purchaser's costs
The Group's investment property assets have been valued for the purposes of the
financial statements after deducting notional purchaser's cost of 5.75% of gross
value, as if they were sold directly as property assets. The valuation is an
asset valuation which is entirely linked to the operating performance of the
business. They would have to be sold with the benefit of operational contracts,
employment contracts and customer contracts, which would be very difficult to
achieve except in a corporate structure. We believe therefore that the valuation
assumptions should be adjusted to reflect the reality.
This approach follows the logic of the valuation methodology in that the
valuation is based on a capitalisation of the net operating income after
allowing a deduction for operational cost and an allowance for central
administration costs. Sale in a corporate structure would result in a reduction
in the assumed Stamp Duty Land Tax but an increase in other transaction costs
reflecting additional due diligence resulting in a reduced notional purchaser's
cost of 2.75% of gross value. All the significant sized transactions that have
been concluded in the UK in recent years were completed in a corporate
structure. We therefore instructed C&W to carry out a Red Book valuation on the
above basis, and this results in a higher property valuation at 30 September
2007 of £678,170,000 (£28,750,000 higher than the value recorded in the
financial statements or 24.2 pence per share). We have included this revised
valuation in the adjusted diluted net asset calculation (see note 13).
15. MOVEMENT IN EQUITY
Share Capital
Share premium redemption Retained Own
capital account reserve earnings Shares Total
£'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2007 11,456 40,864 1,653 434,818 (812) 487,979
Profit for the period - - - 45,988 - 45,988
Current/deferred tax - - - 103 - 103
Dividend - - - (6,277) - (6,277)
Issue of shares 69 529 - - - 598
Equity share options - - - 196 - 196
Purchase of own shares - - - - (1,084) (1,084)
_______ _______ _______ _______ _______ ________
At 30 September 2007 11,525 41,393 1,653 474,828 (1,896) 527,503
======= ======= ======= ======= ======= ========
16. ADJUSTED CASH GENERATED FROM OPERATIONS
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Cash generated from operations 15,960 16,932 30,198
Movement in debtors from excluding
effects of share options 1,141 - -
Movement in creditors from excluding
effects of share options (666) (2,643) -
________ ________ ________
Adjusted cash generated from operations 16,435 14,289 30,198
======== ======== ========
17. RELATED PARTY TRANSACTIONS
There were no related party transactions during the period.
18. JOINT VENTURE
Big Yellow Group PLC (BYG) is pleased to announce the establishment of a £150 million
investment partnership ("the Partnership") with funds managed by Pramerica Real
Estate Investors Limited ("Pramerica") to develop up to 25 stores in the
Midlands and North of England and Scotland. The Partnership will have a four
year exclusivity period on the defined territory.
BYG and Pramerica are investing up to £25 million and £50 million respectively into
the Partnership, of which £4.5 million and £9 million respectively, will be invested
on 30 November 2007, the completion date. All further investments into the Partnership
by Big Yellow and Pramerica will be in the ratio of one third and two thirds
respectively.
A five year term non recourse loan of £75 million has been secured by the Partnership
from the Royal Bank of Scotland PLC to provide investment and development
funding.
BYG has initially agreed to sell five of its development sites together with its
existing store in Leeds to the Partnership. The consideration for the sites and
the store to be transferred into the Partnership, is £20.3 million in cash,
representing a small surplus on book value. BYG has also entered into
conditional contracts to sell two more of its development sites at Manchester
and Birmingham to the Partnership. In the case of Birmingham it is intended that
BYG will develop the store which will be transferred to the Partnership shortly
prior to its completion at cost plus a small surplus. In the case of Manchester,
BYG has previously entered into a conditional agreement with Crosby Homes (North
West) Limited, ("Crosby") for the development of a significant sized mixed use
scheme to include the shell of an 80,000 sq ft self storage centre to be
developed at the expense of Crosby. In the event that the conditions of that
agreement are satisfied, then BYG will fit out the store at its own cost and
shortly prior to its completion transfer the store, to the Partnership at the
then open market value.
The initial proceeds received by BYG from the sale of the development sites and
the Leeds store to the Partnership will be used to further the Group's southern
UK business, and also to finance its contributions to the Partnership.
In the year ended 31 March 2007, the profits before tax attributable to the
development sites and the Leeds store being sold to the Partnership, amounted to
£0.3 million.
BYG has further entered into agreements with the Partnership to provide both
development and operational management services on the initial sites and future
sites and stores. In consideration for these services, BYG will receive certain
acquisition, planning, construction management and operating fees.
BYG has an option to purchase the assets contained within the Partnership or the
interest in the Partnership which it does not own exercisable from the 31 March
2013. On exit whether by way of exercise of the options as set out above or a
sale to a third party, BYG is entitled to certain promotes, which would result
in BYG sharing in the surplus created in the partnership.
The Board of the Partnership will comprise two representatives of both Pramerica
and BYG.
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